Market-Based Supply-Side Policies

There are two types of supply-side policies: Market-based and interventionist. Market-based is centered around freeing up markets (remove the government's role) to make them run more efficiently, and are more neoclassical. There are various policies centered around this idea:

Policies to Encourage Competition 

• Deregulation: Remove rules and regulations from the markets. In many countries there were legal monopolies on utilities, telecoms, mail, etc. but these laws have been removed, improving markets (things should be cheaper and more efficient).

• Privatization: Sell state-owned enterprises to the private sector. In theory, privately run businesses have greater incentive to innovate than government-run ones as they need to make money.

• Trade liberalization: Remove barriers for international trade. If countries remove tariffs and quotas, international trade will increase, which may lead to more competition and efficiency.

• Anti-monopoly regulation: Laws that limit the power of monopolies in the economy. By preventing large mergers and sometimes splitting up companies, more competition will be created. 

Labor Market Policies

• Reduce power of labor unions: Labor unions are organizations that act in the best interest of workers. This means lobbying for higher wages and better working conditions. This is bad for efficiency in the markets as costs of production will increase.

• Reduce unemployment benefits: Fewer unemployment benefits will in theory incentivize more people to look for work than if they got government money.

• Abolish minimum wages: Minimum wages function like price floors, and create more unemployment than in equilibrium (see chart). This is because the cost of labor is too high for many firms, and they will reduce their headcount, creating more unemployment.

Incentive Related Policies

• Personal income tax cuts: If less money is taxed, people may be more incentivized to work harder as they will get to keep more of that money than before.

• Business and capital gains tax cuts: This encourages more investment. If businesses get to keep more of their profits, they can invest more. Capital gains taxes are taxes on the profit you make on investments, so if this tax decreases, more people are incentivized to invest.